DEFINITION of 'Agreement Corporation'

A type of bank chartered by a state to engage in international banking. The bank "agrees" with the Federal Reserve Board (FRB) to limit its activities to those allowed an Edge Act corporation.

BREAKING DOWN 'Agreement Corporation'

In 1916, Congress passed the Agreement Corporation Act, which gave national banks the right to invest a portion of their capital and surplus in state-chartered banks and corporations that would conduct international business. The state-chartered bank had to enter into an agreement with the FRB to be bound by its rules and regulations.

The Agreement Corporation Act produced little activity, so in 1919 Congress passed the Edge Act that authorized the FRB to charter corporations to engage in international banking. Both laws have undergone many changes since passage, and many of their restrictions have been relaxed.

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